C0-Founder of PayPal and current CEO of Tesla Motors, Elon Musk, believes that the traditional way of selling cars is not right for his electronic automobile enterprise. The entrepreneur and inventor thinks that the use of car dealerships to deliver his company’s electric cars to consumers will slow down the 10-year old firms growth. He wants to sell his cars like the Model S directly to consumers by cutting out the middle man. Traditionally car manufacturers use a network of independent dealers to sell their cars in a market but Musks’s plans to by pass this method and has dealer groups up in arms.
Musk spoke about his plans at the electric car manufacturers annual meeting last week and said, “The auto dealers association is definitely creating some problems for us, making it harder to get things done.” The meeting was fairly upbeat after Tesla got some very good news in the weeks to the build up to the annual meeting. The company was able to generate its first ever profit in the previous quarter and also got the the highest marks for its Model S in Consumer Reports magazine.
All this positive news has pushed the stock price of Tesla to jump three times its value in a year. Musk also added more good news at the meeting when he said that gross margins would start approaching those comparable to German car maker Porsche.
In order to implement their new sales method, Tesla is gearing up to grow their sales operation to include a total of 50 location.
Huffington Post reports that, “Musk has said that traditional dealers may not be the best advocate for electric cars because they rely largely on gas-powered vehicles for revenue. Musk said Tuesday that consumers were broadly supportive of direct-to-consumer sales.” They also add that, “He told shareholders that the traditional dealer model has not worked for other auto start-ups, including Fisker Automotive and Coda Holdings, which filed for bankruptcy last month.”
However, David Hyatt, who is the vice president of public affairs for the National Automobile Dealers Association, thinks that Musk is wrong. He says that, “Industry experts say Fisker failed because it rushed its product to market before engineering problems were resolved. Coda did not receive government loans and was under-capitalized.
He went on to add that, “Thank goodness there are independent dealers left to try to help the customer. Manufacturers and brands may come and go, but the dealers are there for the long term.”
Source: HuffPost
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